UK unemployment could hit 11-year high in 2026 as growth stalls, economists warn

"UK unemployment is expected to climb to its highest level in more than a decade in 2026, as economists warn that weak growth, rising employment costs and subdued private sector confidence continue to weigh on the labour market. According to The Times' annual Economists Survey of 48 leading economists, more than two-thirds believe the unemployment rate will end 2026 between 5% and 5.5%, up from its current level of 5.1%."

"The survey paints a downbeat picture of an economy increasingly reliant on government spending, with private sector hiring constrained by higher taxes, rising wages and ongoing uncertainty following the Chancellor's autumn Budget. Economists point to Rachel Reeves's £25bn increase in employer National Insurance contributions, alongside higher minimum wages and forthcoming changes under the Employment Rights Bill, as key drags on hiring intentions."

"Fhaheen Khan, senior economist at Make UK, said businesses are being hit "from multiple directions" when it comes to employment costs, making recruitment and workforce expansion increasingly difficult. Nina Skero, chief executive of the Centre for Economics and Business Research, added that hiring will remain "suppressed" as firms grapple with weak demand, higher payroll taxes and what she described as an "exceptionally high" minimum wage in some sectors."

More than two-thirds of 48 leading economists expect unemployment to end 2026 between 5% and 5.5%, potentially reaching the highest rate since 2015. Weak economic growth, rising employment costs and subdued private sector confidence are weighing on the labour market. A £25bn rise in employer National Insurance, higher minimum wages and forthcoming Employment Rights Bill changes are cited as major drags on hiring. Businesses face multiple cost pressures that make recruitment and workforce expansion difficult, prompting SMEs to delay hiring, increase automation and focus on productivity rather than headcount. Most economists forecast UK GDP growth of 1–2% in 2026, with much driven by public spending.

Read at Business Matters